An Act to amend the Code of Virginia by adding in Title 59.1 a
chapter numbered 52, consisting of sections numbered 59.1-571 through 59.1-574,
relating to the formation of a benefits consortium by a sponsoring association.

[S 934]

Approved

Be it enacted by the General Assembly of Virginia:

1. That the Code of Virginia is amended by adding in Title
59.1 a chapter numbered 52, consisting of sections numbered 59.1-571 through
59.1-574, as follows:

As used in this chapter, unless the context requires a
different meaning:

"Benefits consortium" means a trust that complies
with the conditions set forth in §59.1-572.

"Benefits plan" means a health plan that is
sponsored by a sponsoring association and offered or sold to members through a
trust to provide health benefits as permitted under ERISA and the provisions of
this chapter.

2. Has had in the five preceding years an average of not
fewer than five members;

3. Has been formed and maintained in good faith for
purposes other than obtaining or providing health benefits;

4. Does not condition membership in the sponsoring
association on any factor relating to the health status of an individual,
including an employee of a member of the sponsoring association or a dependent
of such an employee;

5. Makes any benefits plan available to all members
regardless of any factor relating to the health status of such members or
individuals eligible for coverage through a member;

6. Does not make any benefits plan available to any person
who is not a member of the association;

7. Operates as a nonprofit entity under §501(c)(6) of the
Internal Revenue Code of 1986; and

8. Meets such additional requirements as may be imposed
under the laws of the Commonwealth.

"Sponsoring association" includes any wholly owned
subsidiary of a sponsoring association.

"Trust" means a trust that (i) is established to
accept and hold assets of a health plan in trust in accordance with the terms
of the written trust document for the sole purposes of providing medical,
prescription drug, dental, and vision benefits and defraying reasonable
administrative costs of providing health benefits under a benefits plan and
(ii) complies with the conditions set forth in §59.1-572.

A trust shall constitute a benefits consortium and be
authorized to sell or offer to sell benefits plans to members of the sponsoring
association in accordance with the provisions of this chapter if all of the
following conditions are satisfied:

1. The trust is subject to (i) ERISA and U.S. Department of
Labor regulations applicable to multiple employer welfare arrangements and (ii)
the authority of the U.S. Department of Labor to enforce such law and
regulations;

2. A Form M-1, Report for Multiple Employer Welfare
Arrangements (MEWAs), for the applicable plan year shall be filed with the U.S.
Department of Labor identifying the arrangement among the trust, sponsoring
association, and benefits plans offered through the trust as a multiple
employer welfare arrangement;

3. The trust operates as a nonprofit voluntary employee
beneficiary association within the meaning of §501(c)(9) of the Internal
Revenue Code of 1986;

4. The trust's organizational documents:

a. Provide that the trust is sponsored by the sponsoring
association;

b. State that its purpose is to provide medical,
prescription drug, dental, and vision benefits to participating employees of
the sponsoring association or its members, and the dependents of those
employees, through benefits plans;

c. Provide that the funds of the trust are to be used for
the benefit of participating employees, and the dependents of those employees,
through insurance, self-insurance, or a combination thereof, as determined by
the trustee, and for defraying reasonable expenses of administering and
operating the trust and any benefits plan;

d. Limit participation in benefits plans to the sponsoring
association and its members;

e. Limit the health plans offered through the trust to
benefits plans;

f. Grant the sponsoring association the power to appoint
the trustee of the trust;

g. Provide the trustee with powers for the control and
management of the trust; and

h. Require the trustee to discharge its duties with respect
to the trust in accordance with the fiduciary duties defined in ERISA;

7. The trust has purchased and maintains policies of
specific, aggregate, and terminal excess insurance with retention levels
determined in accordance with sound actuarial principles from insurers licensed
to transact the business of insurance in the Commonwealth;

8. The trust has secured one or more guarantees or standby
letters of credit that:

a. Guarantee the payment of claims under the benefits plans
in an aggregate amount not less than the trust's annual aggregate excess
insurance retention level, minus the annual premium assessments for the
benefits plans, minus the trust's net assets, which net assets amount shall be
net of the trust's reasonable estimate of incurred but not reported claims; and

b. Have been issued by (i) banks participating in the
benefits plans or (ii) qualified United States financial institutions as such
term is used in subdivision 2 c of §38.2-1316.4;

10. The trust has purchased and maintains a bond that
satisfies the requirements of ERISA;

11. The trust is audited annually by an independent certified
public accountant;

12. The trust does not include in its name the words
"insurance," "insurer," "underwriter,"
"mutual," or any other word or term or combination of words or terms
that is uniquely descriptive of an insurance company or insurance business
unless the context of the remaining words or terms clearly indicates that the
entity is not an insurance company and is not carrying on the business of
insurance; and

13. The trust does not pay commissions or other
remuneration to any person that is conditioned upon the enrollment of persons
in any benefits plan.

B. The sponsoring association of a benefits consortium
shall not, by virtue of its sponsorship of the benefits consortium or any
benefits plan, be subject to any provisions or regulations described in
subdivision A 1 or any tax described in subdivision A 2.